August 10, 2011 - A recent Gartner study showing that CFOs are making 26 percent of IT spending decisions and CIOs are authorizing only 5 percent seemed to be dismal news for IT leaders. A conversation with John Beran, the just-retired CIO from Comerica, confims that it is. "The CIO should report to a CEO or a COO, not a CFO," Beran says. At Comerica, Beran originally reported to the bank's COO until that person retired and wasn't replaced, then he reported to the CEO.
The survey of 344 CFOs and other senior financial executives, which was conducted with the Financial Executives Research Foundation and Financial Executives International, showed that 42 percent of IT organizations report directly to the CFO, and 33 percent of IT organizations report to the CEO.
"In some cases, this is the result of the economic shift, the need to manage IT as a cost center," says John Van Decker, research vice president at Gartner. "With limited funds available for investment and with companies being careful about where they do invest, CFOs are inserting themselves into the process to make sure each IT project provides value, especially if it involves an increase in head count."
This is not necessarily a bad thing, Van Decker believes. "Ultimately technology is owned by every business area, it's the role of the CIO to bring together and coordinate the projects," he says. "It shouldn't be the role of the CIO to ultimately make the decision of which projects are going to be done."
Beran disagrees. CIOs could and should assert themselves more, he believes. However, they need to establish credibility first. "A CIO's job is to translate technology for the rest of the company - why is some system important to do - and not do it in technospeak."
The way a CIO presents the business case for a major project is important, Beran says. "When you're trying to get approval for major capital expenditures, it's a matter of doing your work and explaining how the numbers were derived," he says. "It's a true business case analysis, you've got to demonstrate the value. That's not always going to be dollar value. You've got to be able to clearly articulate the value proposition for whatever investment you're trying to make." Before he would take a multi-million-dollar capital expense to his CEO, Beran might spend a year getting the case ready. "When I went in there, I wanted to make sure I believed in it, that I understood what that benefit was going to be and I could explain it." For instance, he might describe a branch technology upgrade in terms of how much faster the applications would run and therefore how much customer service could improve.
"You treat it as a business," he says.
There are some variance in the CIO/CFO decisionmaking divide depending on company size. In companies with less than $50 million in revenue, 47 percent of IT departments report to the CFO. Fifty-eight percent of companies with revenue of more than $50 million and less than $250 million have IT departments that report to the CFO, while 46 percent of companies with $1 billion or more in revenue have IT reporting to the CFO.
When it comes to how CFOs are making IT investment decisions, at 72 percent of firms the finance executives said that they will invest where they see a competitive advantage driven by IT. Business intelligence (BI) is the top technology initiative from the perspective of the senior financial executive. For a combined 65 percent of choices, BI ranked as the technology with the highest demand, while 46 percent ranked enterprise business applications, such as enterprise resource planning and integrated financial management solutions, as investment priorities. When viewed within the larger scope of operations' infrastructure, however, business applications (30 percent) were seen as more important than BI (23 percent) in 2011.
CIOs have to sell the advantages of new tools. "The key for a CIO isn't to think about the technology," Beran says. "I had people who were very good technologists who did the architecture and engineering. My role was to guide them and develop with them the business value proposition about what they want to do."
This article originally appeared in Bank Technology News.
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